National Bank of Lahore Ltd. Vs.
Sohanlal Sehgal & Ors  INSC 56 (5 March 1965)
05/03/1965 SUBBARAO, K.
CITATION: 1965 AIR 1663 1965 SCR (3) 293
Limitation Act, 1908, First Schedule,
Articles 36 and 115--Scope of
The respondents hired lockers in the safe
deposit vaults from the appellant bank at Jullundur through its manager under
different agreements on various dates during 1950. In April 1951, the lockers
were tampered with and the valuables of the respondents kept in them were
removed by the Manager.
In due course the Manager was prosecuted and
convicted for theft. The respondents filed three suits against the bank for the
recovery of different sums being the value of the contents of the lockers which
had been removed. The bank denied its liability on various grounds and also
contended that the suits were, barred by limitation.
The trial court held that the Bank was liable
to bear the loss incurred by the respondents and that the suits were not barred
by limitation. On appeal, the High Court accepted the findings of the trial
court on both the questions and dismissed the appeals.
In the appeal before the Supreme Court, only
the question of limitation was raised. It was contended of behalf of the
appellants on the facts found that the suit was barred by limitation as the
theft of the valuables by the Manager was a tort committed by him dehors the
contracts entered into by the appellant with the respondents and, therefore,
Article 36 of the Limitation Act which required that a suit must be instituted
within two years applied, and not Art. 115, which provided for a period of
limitation of three years; that the suits were, not based on a breach of
contract committed by the bank but only the theft committed by its agent dehors
the terms of the contract.
HELD: The suit claims, being ex contract,
were clearly governed by Article 115 of the First Schedule to the Limitation
Act and by Article 36. [298F] There were clear allegations in the plaint that
the appellant committed breach of contract in not complying with some of the
constitutions thereof and that the appellant understood those allegations in
that light and traversed them. [298 E] Even ii the respondents' claim was
solely based on the fraud committed by the manager during the course of his
employment, such a claim could not fall under Art. 36. To attract Art. 36, the
misfeasance must be independent of contract. The fraud of the manager committed
in the course of his employment must be deemed to be a fraud of the principal,
i.e. the Bank must be deemed to have permitted manager to commit theft in
violation of the terms of the contracts. While under the contracts the bank was
under an obligation to provide good lockers and not to permit access to the
safe except to persons mentioned in the contracts, in violation of these terms
the bank gave defective lockers and gave access to the manager, thus
facilitating the theft. In either case the wrong committed was not independent
of the contract but directly arose out of the breach of contract.
[298 G, H]
CIVIL APPELLATE JURISDICTION: Civil Appeals
930 and 931 of 1963.
Appeals by special leave from the judgment
and decree dated October 11, 1961 of the Punjab High Court in Regular First Appeals
Nos. 136, 137 and 138 of 1959.
Hans Raj Sawhney and B.C. Misra, for the
appellant (in all the appeals).
B.R.L. lyengar, S.K. Mehta and K.L. Mehta for
the respondents (In C.A. No. 229 of 1963).
V.D. Mahajan, for the respondent. (In C.A.
No. 930 of 1963).
Kanwar Rajendra Singh and Vidya Sagar Nayyar,
for the respondent (In C.A. No. 931 of 1963).
The Judgment of the Court was delivered by
Subba Rao, J. These appeals by special leave raise a question, of limitation.
The National Bank of Lahore Limited,
hereinafter called the Bank, is a banking concern registered under the Indian
Companies Act and having its registered office in Delhi and branches at
different places in India. Though its main business is banking, it carries on
the incidental business of hiring out lockers out of cabinets in safe deposit
vaults to constituents for safe custody of their jewels and other valuables. It
has one such safe deposit vault at its branch in Jullundur. The respondents
herein hired lockers on rental basis from the Bank at Jullundur through its
Manager under different agreements on different dates during the year 1950. in
April 1951 the said lockers were tampered with and the valuables of the
respondents kept therein were removed by the Manager of the Jullundur branch of
the Bank. In due course the said Manager was prosecuted before the Additional
District Magistrate, Jullundur, and was convicted under ss.
380 and 409 of the Indian Penal Code. The
respondents filed 3 suits in the Court of the Subordinate Judge, Jullundur,
against the Bank for the recovery of different sums on account of the loss of
the valuable contents of the lockers hired by them. The Bank denied its
liability on various grounds and also contended that the suits were barred by
The learned Subordinate Judge held that the
Bank was liable to bear the loss incurred by the plaintiffs and that the suits
were not barred by limitation. On appeal, the High Court of Punjab accepted the
findings of the learned Subordinate Judge on both the questions and dismissed
the appeals. The present appeals arise out of the said judgment of the High
The only question raised in these appeals is
one of limitation. Before considering the question of limitation it is
necessary 295 notice briefly the findings of fact arrived at by the High Court.
The High Court summarized its findings thus:
(1) The whole object of a safe deposit vault
in which customers of a Bank can rent lockers for placing their valuables is to
ensure their safe custody. The appellant-Bank had issued instructions and laid
down a detailed procedure for ensuring that safety but in actual practice the
Manager alone had been made the custodian with full control over the keys of
the strong room and a great deal of laxity had been observed in having no check
whatsoever on him.
(2) The lockers had been rented out to the
plaintiffs by the Manager Baldev Chand, who was entrusted with the duty of
doing so. It was he who had intentionally rented out such lockers to the
plaintiffs which had been tampered with by him. This constituted a fraud on his
part there being an implied representation to the plaintiffs that the lockers
were in a good and sound condition.
(3) Although the Bank authorities were not
aware of what Baldev Chand was doing. but the fraud, which he perpetrated, was
facilitated and was the result of the gross laxity and negligence on the part
of the Bank authorities.
(4) The lockers were indisputably being let
out by the Manager to secure rent for the Bank.
Having found the said facts, the High Court
held that the fraud was committed by the Manager acting within the scope of his
authority and therefore, the Bank was liable for the loss incurred by the
respondents. Then it proceeded to consider the question of limitation from
three aspects, namely. (i) the loss was caused to the respondents. as the
Manager of the Bank committed fraud in the course of his employment; (ii) there
was a breach of the implied condition of the contract. namely, that only such
lockers would be rented out which were safe and sound and which were capable of
being operated in the manner set out in the contract; and (iii) there was a
relationship of bailor and bailee between the respondents and the Bank, and
therefore the Bank would be liable on the basis of the contract of bailment. It
held that from whatever aspect the question was approached Art. 36 of the First
Schedule to the Limitation Act would be out of place and the respondents'
claims would be governed by either Art. 95 or some other article of the
Learned counsel for the appellant accepted
the findings of fact, but contended that on the facts found the suits were
barred by limitation. Elaborating the argument the learned counsel pointed out
that the theft of the valuables by the Manager was a tort committed by him
dehors the contracts entered into by the appellant with the respondents and.
therefore, Art. 36 of the First Schedule 296 to the Limitation Act was
immediately attracted to the respondents' claims.
The scope of Art. 36 of the First Schedule to
the Limitation Act is fairly well settled. The said article says that the
period of limitation "for compensation for any malfeasance, misfeasance or
nonfeasance independent of contract and not herein specifically provided
for" is two years from the time when the malfeasance, misfeasance or
nonfeasance takes place. If this article applied, the suits having been filed
more than 2 years after the loss of the articles deposited with the Bank, they
would be dearly out of time. Article 36 applied to acts or omissions commonly
known as torts by English lawyers. They are wrongs independent of contract.
Article. e 36 applies to actions "ex delicto" whereas Art. 115
applies to actions "ex contractu". "These torts are often
considered as of three kinds, viz. non-feasance or the omission of some act
which a man is by law bound to do, misfeasance, being the improper performance
of some lawful act, or malfeasance, being the commission of some act which is
in itself unlawful". But to attract Art. 36 these wrongs shall be
independent of contract. The meaning of the words "independent of
contract" has been felicitously brought out by Greer, L.J. in Jarvis v.
Moy, Davies, Smith, Vanderveil and Co.(1) thus:
"The distinction in the modern view, for
this purpose, between contract and tort may be put thus. Where the breach of
duty alleged arises out of a liability independently of the personal obligation
undertaken by contract it is tort and it may be tort even though there may
happen to be a contract between the parties, if the duty' in fact arises
independently of that contract. Breach of contract occurs where that which is
complained of is a breach of duty arising out of the obligations undertaken by
the contract." If the suit claims are for compensation for breach of the
terms of the contracts, this article has no application and the appropriate
article is Art. 115, which provides a period of 3 years for compensation for
the breach of any contract, express or implied, from the date when the contract
is broken. If the suit claims are based on a wrong committed by the Bank or its
agent dehors the contract, Art. 36 will be attracted.
Let us now apply this legal position to the
claims in question. One of the contracts that was entered into between the
plaintiffs and the Bank is dated February 5, 1951. It is not disputed that the
other two contracts, with which we are concerned, also are of the same pattern.
Under that contract the Bank, the appellant herein, and Sohanlal Sehgal, one of
the respondents herein, agreed "to hire, subject to the conditions
endorsed, the company's safe No. 1651/  1 K.B. 399. 405.
297 2203 Class lower for one year from this
day at a rent of Rs.
40". The relevant conditions read as
It is agreed that the connection of the
renter of the safe and the Bank (and it has no connection) is that of a lessor
and lessee for the within mentioned safe and not that of a banker and customer.
15. The liability of the company in respect
of property deposited in the said safe is limited to ordinary care in the
performance by employees and officers of company of their duties and shall
consist only of (a) keeping the safe in vault where located when this rental
contract is entered into or in one of equal specifications, the door to which
safe shall be locked at all time except when an officer or an employee is
present, (b) allowing no person access to said safe. except hirer or authorised
deputy, or attorney in fact having special power to act identification by
signature being sufficient or his/her legal representative in the case of
death, insolvency or other disability of Hirer, except as herein expressly
An unauthorised opening shall be presumed or
inferred from proof of partial or total loss of contents.
16. The company shall not be liable for any
delay caused by the failure of the vault doors or locks to operate.
17. The company shall not be liable for any
The only purpose of the contract was to
ensure the safety of the articles deposited in the safe deposit vault. It was
implicit in the contract that the lockers supplied must necessarily be in a
good condition to achieve that purpose and, therefore, that they should be in a
reasonably perfect condition. It was an implied term of such a contract.
Condition 15 imposed another obligation on
the Bank to achieve the same purpose, namely, that the Bank should not allow
access to any person to the safe except the hirer or his authorised agent or
attorney. If the articles deposited were lost because one or other of these two
conditions was broken by the Bank, the renter would certainly be entitled to
recover damages for the said breach. Such a claim would be ex contractu and not
ex delicto and for such a claim Art.
115 of the First Schedule to the Limitation
Act applied and not Art. 36 thereof.
Learned counsel for the appellant contended
that the suits were not based upon the breach of a contract committed by the
Bank but only the theft committed by its agent dehors the terms of the
contract. This leads us to the consideration of the scope of the plaints
presented by the respondents. It would be enough if we take one of the plaints
as an example, for others also run on the same lines. Let us take the plaint in
Civil Suit No. 141 of 1954, i.e., the suit filed by Sohanlal Sehgal and others
against the Bank for the recovery of d sum of Rs. 26,500. We have carefully
gone through 298 the plaint, particularly paragraphs 8, 9 and 10 thereof. It
will be seen from the plaint that though it was not artistically drafted the
relief was claimed mainly on two grounds, namely, (i) that it was an implied
term of the contract that the locker rented was in a good condition, and (ii)
the valuables were lost because the Manager, on account of the negligence of
the Bank in not taking all the necessary precautions, committed theft of the
articles in the course of his employment. In the written-statement the
defendant denied its liability both under the terms of the contract and also on
the basis that it was not liable for the agent's fraud. The High Court found
that at the time when the lockers were rented out they were in a defective
condition and that the Bank, in actual practice, made the Manager the sole
custodian with full control over the keys of the strong room and permitted a
great deal of laxity in not having any check whatsoever on him. In this state
of the pleadings and the findings it is not possible to accept the contention
of the learned counsel' for the appellant that the plaintiffs did not base
their claims on the branch of the conditions of the contracts. This argument is
in the teeth of the allegations made in the plaint, evidence adduced and the
arguments advanced in the Courts below and the findings arrived at by them.
While we concede that the plaint could have been better drafted and couched in
a clearer language, we cannot accede to the contention that the plaints were
solely based upon the fraud of the Manager in the course of his employment. We,
therefore. hold that there were clear allegations in the plaints that the
defendant committed breach of the contracts in not complying with some of the
conditions thereof and that the defendant understood those allegations in that
light and traversed them. The suit claims, being ex contractu were clearly
governed by Art. 115 of the First Schedule to the Limitation Act and not by
Art. 36 thereof.
If Art. 115 applied, it is not disputed that
the suits were within time.
Even if the claim was solely based on the
fraud committed by the Manager during the course of his employment. we do not
see how such a claim fell under Art.
36 of the First Schedule to the Limitation
Act. To attract Art. 36. the misfeasance shall be independent of contract.
The fraud of the Manager committed in the
course of his employment is deemed to be a fraud of the principal, that is to
say the Bank must be deemed to have permitted its manager to commit theft in
violation of the terms of the contracts.
While under the contracts the Bank was under
an obligation to give to the respondents good lockers ensuring safety and
protection against theft, it .gave defective ones facilitating theft; while
under the contracts it should not permit access to the safe to persons other
than those mentioned in the contracts. in violation of the terms thereof it
gave access to its Manager and enabled him to commit theft. In either case the
wrong committed was not independent of the contract. but it directly arose out
of the breach of the contract.
299 1n such circumstances Art. 36 is out of
place. The competition between Arts. 115 and 120 to take its place need not be
considered. for neither of those Articles hits the claim, as the suits are
within 3 years. which is the shorter of the two periods of limitation
prescribed under the said two Articles.
In this view it is not necessary to express
our view on the question whether the contracts in question were of bailment.
In the result, the appeals fail and are
dismissed with costs one hearing fee.